Blockbuster put tons of indies out of business by being significantly bigger in size, and having lots more copies of the latest hits on hand. But in an era when the hottest rental store in town is a phone booth-size kiosk with a few hundred titles, the glory days of the rental superstore are clearly over.
I remember back when Blockbuster began its swift ascension up the ranks of rental retailing. The perception of the average video store at the time was of a small, dimly lit place, with faded posters on the windows and walls. Granted, there were a lot of really good indie operators out there, but this was the perception--and it was one Blockbuster capitalized on with its ad campaigns that highlighted its huge, brightly lit stores and vast inventories.
Other chains with aspirations of going national copied the Blockbuster model, including Movie Gallery and Hollywood Entertainment (now merged and having a tough time). Gradually Blockbuster stopped playing up its selection and, as the rental business matured and business growth began to slow, focused on the hits. Towering new release walls became a hallmark of Blockbuster, and the chain prided itself on satisfying customer demand for the hits, only to shoot itself in the foot. The rental business, you see, was built not on consumer satisfaction, but on consumer dissatisfaction. People went to video stores and if the hit of the week was out of stock, they rented two or three other movies. Sure, they complained, but it was an accepted practice that if you didn't hit the video store early on a Friday or Saturday night, you probably weren't going to go home with the movie you intended to rent.
Blockbuster took those complaints seriously and, with the studios' support, rolled in the hits by the truckload. For awhile, it worked, but then came DVD and the sellthrough explosion, which left Blockbuster out in the cold.
The trouble was, Blockbuster had trained its customers to settle for nothing short of the biggest hits, so when those big hits became available at a sellthrough price, consumers flocked to the mass merchants--who by their very nature are all about mass appeal--to buy them. Now that the economy's in the toilet, consumers are renting again, but they don't want to wade through 10,000-square-foot stores to check out the titles they want. They want them right at their fingertips, a desire that's quite successfully met by both kiosks and Netflix's rent-by-mail proposition.
What's the solution? Jim Keyes surely would like to know. He's tried everything, from offering DVDs and Blu-ray Discs for sale at competitive prices to launching his own mail-order and kiosk programs. Heck, about the only thing he hasn't done is put Redbox machines in his stores.
I'm joking, of course. But then again, maybe there's some truth in that. Maybe Jim should lose the biggest stores and completely revamp the smaller ones. Put in an expanded vending machine with the latest hits, and another machine offering these same titles, both DVD and Blu-ray Disc, for purchase. Toss in a couple of tables and chairs and a rack of movie magazines and maybe a couple of computers so customers can access sites like Home Media Magazine, Moviefone and others that talk about new DVD and Blu-ray Disc releases. Devote a corner of the store to a Blu-ray theater, with an HDTV and a Blu-ray Disc player offering continuous showings of the latest new releases. And then depending on the store's demographic, have a foreign film section, a horror movie section, a cult classic section--whatever works--in which each disc is available for either sale or rent.
Blockbuster would evolve from a chain of superstores to a chain of smaller, individualized movie stores, catering to both the quick-in-and-out "give me the hits" crowd and the neighborhood's film buffs.
Neither group may be enough to sustain a store on its own, but both are put off by the cookie-cutter superstores Blockbuster continues to be known for to this day.
By: Thomas K. Arnold
I had a very interesting conversation with a gentleman from Intel this afternoon on the show floor of CES in Las Vegas. Demonstrating Intel's new core processors, he noted that computers are being asked to do so much more these days, particularly in the way of high-definition video, that processor speed needs to come up -- hence, Intel's new line, which even has a "turbo" function to really rev things up when needed. He held up a JVC high-definition video camera and told me the cost has come down by half since Christmas, and when I told him I had held off buying one mainly because I wasn't sure my computer could handle it, he said, "Yeah, don't waste your time burning high-definition video of your summer vacation to DVD. You need Blu-ray."
That opened up a whole conversation about Blu-ray's current limitation in the portability realm, including the conspicuous lack of Blu-ray Disc drives in laptops and PCs. That's all about to change, he told me, because the cost of these Blu-ray Disc drives has plummeted.
"It used to be it would add $200 or $300 to the cost of a laptop, and when you're talking about a list price of $600 to $800, that's a big deal," he said. "But now, the upcharge can be as little as $100, so now it finally makes sense."
Hopefully he's right. For Blu-ray to really flourish, we need mass playback devices, and that includes computers. I continue to be amazed that Blu-ray drives are not yet standard in computers, particularly given the capacity issues we're now facing across the board with virtually all media. Three years ago the average digital image, from a point-and-click digital camera, was 800K; today, it's 5MB. And as my friend at Intel said, "We're now looking at 4GB of high-def video footage, just from a kid's birthday party." My hunch is that particularly now that the price of drives has fallen, we're going to see a proliferation of computers with Blu-ray Disc drives, maybe even as standard equipment. To not do so at ths point simply doesn't make any sense."
At the same time, I expect more portable Blu-ray disc players such as the one displayed by Toshiba, and hopefully some car units as well. At the Audiovox booth I saw a new car DVD player with a built-in PlayStation 2. Great idea, I thought to myself, but this is a marriage of two outdated technologies. Why not offer a combo Blu-ray Disc/PlayStation 3 car unit? You'd think that might even be easier, since a PlayStation 3 already has a Blu-ray Disc drive built in. Hey, now that's an idea -- the next generation of car players would simply consist of a PlayStation 3, which can double as a game and movie machine. Sony, are you listening?
By: Thomas K. Arnold
It's been a wild and crazy two days here in Las Vegas, beginning with a most enjoyable cocktail party sponsored by DEG: The Digital Entertainment Group that ended with a bunch of us being holed up in a nearby banquet room watching the Crimson Tide roll all over Texas. I couldn't help but laugh when the goody bags were being handed out -- each bag contained maybe a dozen Blu-ray Discs and two DVDs, and I overheard one person pull out the DVDs and mutter, "What's this?" Granted, this was an industry crowd, but you can see the writing on the wall: DVD will one day soon be looked up much as we now look at VHS. I now firmly believe everything will ultimately be issued on Blu-ray Disc, even vintage TV shows and old black-and-white movies. People will gradually liquidate their DVD collections and go all Blu. Studios may not get the premium pricing they initially wanted, but they surely will get mass library replacements. Once you go Blu, you just don't want anything else anymore.
On the show floor, the big buzz was 3D, commanding center stage at vast booths from Panasonic (which was showing clips of Avatar), Sony, Toshiba and other large CE companies. The buzz was of course intensified with word that Sony Pictures and Walt Disney Studios are both plunging headfirst into 3D. Given 3D's acceptance in movie theaters, I think the home market is primed and ready. I know mine is -- and I'm talking not just about the kids but about me. I love 3D, and frankly I can't wait.
I also want to give kudos to Toshiba for displaying a portable Blu-ray Disc player. The company that for so long backed rival HD format HD DVD is now a true Blu convert and is back to innovating and leading the market. We need a lot more companies making portable Blu-ray Disc players and mobile units for cars, as well. Blu-ray Disc has the upper hand in quality and is now affordable as well. What we need now is flexibility.
By: Thomas K. Arnold
Just rolled into town late last night from our annual winter road trip — my wife's from Alabama (she grew up not far from Warner Home Video president Ron Sanders!) and each year between Christmas and New Year's she flies home while I take the three boys on a cross-country road trip. As usual I've kept my eyes and ears open about anything pertaining to our business, and here are a few observations:
1) Virtually every minivan or SUV had a DVD player going. I could see it clearly through the back window as I drove through Arizona, New Mexico, Texas, Louisiana, Mississippi and Alabama.
2) Even in the rural South, Blu-ray appears to be catching on. I went to a regional chain called HH Gregg, sort of a mini-Best Buy, to buy a new router for Diana's sister and her family. Two people were ahead of me at the checkout counter on New Year's Eve, and both had a Blu-ray player in their carts.
3) I bought my nieces a Blu-ray player for Christmas. As soon as it arrived my 20-year-old niece Margaret sent me a text message: "Blu-ray player = best Christmas gift EVER!!!"
4) Aunt Tanya's neighbors, the Slawinskis, are big on direct satellite delivery of movies and other programming into their home. And yet they get most of their movies by mail from Netflix. "It's just simpler," the dad, John, told me.
So much for my road stories. On the last day of my trip, I was reading USA Today in my Hampton Inn hotel room in Las Cruces, New Mexico, when I saw the story about ESPN launching a 3D network June 11 with a three-dimensional broadcast of a World Cup soccer match (to see the story, click here). Does anyone out there realize how big this is for our business? You have to start with the proposition that the future of our packaged media business depends on Blu-ray, and that 3D is being widely hailed as the format's killer app — amid hopes that 3D in the home will be as big and as lucrative as 3D has been in the movie theater.
The fact that ESPN is committing so much time and money toward 3D is a tremendous vote of confidence, even just in the proverbial arena of public opinion. If I am Joe Consumer and I read about Blu-ray bringing 3D movies into the home on specially equipped TVs, I'd be thinking "Cool, maybe I'll get one if it takes off." But the ESPN announcement changes all that. Now, Joe must be thinking, "Wow — 3D is really happening, and I can't wait for the fall so I can enjoy football games in 3D with my friends."
If Joe was on the fence, the ESPN announcement just pushed him over. College football games in 3D? Come on! And once you start seeing a critical mass of 3D TVs in U.S. households, 3D movies on Blu-ray Disc are the logical next step, particularly since our business is all lined up and waiting to take the plunge.
Right now the biggest problem in getting the masses to switch from standard DVD to Blu-ray Disc is the perception that the difference isn't all that much. Throw 3D into the equation and that excuse no longer holds water.
Pardon the pun, but it's a whole other dimension.
By: Thomas K. Arnold
Up until this morning, I had never even heard of David Poland. But after getting a link to his latest blog (you can see it by clicking here) I am a devoted fan.
In a blog entry titled "NYT + Brooks Barnes = Embarrassment," he assails the august "newspaper of record" for misunderstanding the movie business and the movie-making process. He also calls the paper's repetitive "DVD downturn" chant "completely half-assed."
Poland's angry blog posting underscores a very real problem in the consumer media: Too often, they just don't understand our business, and rely on superficial analysis that bears no resemblance whatsoever to reality. The "packaged media is dead" mantra, which the press has been repeating for years, is now louder than ever, with journalists picking up the downturn in DVD sales while completely ignoring the uptick in rentals and the significant and impressive gains in Blu-ray Disc sales--as well as the studios' all-out efforts to truly take Blu-ray to the masses by both encouraging lower sales prices and making the transition to the high-definition format as easy as humanly possible through the proliferation of affordable, all-in-one combo packs and flipper discs.
I'm also going to do what I can to set the record straight, to make sure the real story about our business gets out in the widest possible way. Check back here on Monday for my annual year-end analysis, which also will be featured in next week's print and digital editions of our magazines. Pass it around to anyone and everyone you know. I've also written a shorter, more pointed analysis for The Hollywood Reporter that's getting some pretty nice pickup, including the New York Times. You can read that piece by clicking here.
Happy holidays to all--I'm taking the family to Disneyland today for our annual visit. I'll be here throughout the holidays, however, so please check back often! It's been quite a year, and if you read my analysis you'll see rumors of our industry's death, with apologies to Mark Twain, truly are exaggerated.
By: Thomas K. Arnold
Insights from the "voice of the home entertainment industry." Thomas K. Arnold gives the inside scoop on entertainment news, DVD, Blu-ray releases, and what's happening at the key studios and retailers.
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